The strong foreign demand keeps the province of Alicante third in home sales
The province of Alicante has long since become a real power in the sale of homes, something that has become evident again in the second quarter of the year, in which it has maintained its third place in the ranking, only behind Madrid and Barcelona, thanks to the 12,622 formalized operations. This strength, however, comes from the strong foreign demand, since 45% of the buyers were foreigners, which places the Alicante territory at the forefront in this area at the national level.
Real Estate Market Stable
The Spanish real estate market is expected to remain stable for the remainder of the year, but with the possibility of price adjustments. The first half of the year saw a slowdown in real estate activity, but the second half of the year is expected to accelerate as the market recovers from the uncertainties of the current moment. Despite these current challenges, the Spanish real estate market continues to shine as a leading player in the European real estate landscape.
The Spanish property market is poised for a more stable trajectory in the last half of 2023, although there may be some price declines in certain areas. Experts have diverse perspectives on price fluctuations, with projections ranging from a potential drop of three percent to a modest increase of four percent. These variations reflect the uncertainty that prevails within the evolving economic landscape. However, amid this uncertainty, the Spanish market stands out as one of the best performing markets in Europe. Let's look at some of the factors that are affecting the Spanish real estate market so far this year.
State of the real estate market in Spain
Spain presents abundant opportunities for Spaniards, foreigners and remote workers, mainly due to its exceptional quality of life, multitude of attractions and vibrant culture. With 320 remarkable days of sunshine and a favorable cost of living, Spain stands out as one of the most desirable destinations for relocation and remote work. The charm of Spain lies not only in its natural beauty but also in the warmth and hospitality of its people.
According to many experts, it is unlikely that Spain is currently experiencing a real estate bubble. Several factors support this view, including the fact that the ratio of real estate to income is not considered excessive for most Spaniards. In addition, the leverage between individuals and the number of new properties being introduced to the market is not excessive. These factors contribute to the overall assessment that the Spanish real estate market is not in a bubble.
Spanish homebuyers often have high aspirations to own a home and consider buying a property to be an important milestone: a way to generate wealth and stability for their families. Family plays a central role in culture, and homebuyers can prioritize features that fit multigenerational living or provide space for extended family members. Close-knit communities are valued, and shoppers tend to seek neighborhoods that have a strong sense of community, cultural services, and access to resources such as schools, parks, and community centers are desirable.
If you can offer bilingual services to these buyers, including mortgage documents and educational resources, you can create a more inclusive and accessible homebuying experience. Did you know that Properstar Concierge will communicate with your foreign clients? Read more about it here. Flexible lending options and access to credit-building resources are attractive to homebuyers, as many face unique financial challenges or have limited credit histories. Spaniards often rely on word-of-mouth recommendations and personal relationships when making important financial decisions.
This knowledge is useful for you to understand and address the specific needs, preferences and cultural considerations of Spanish home buyers and to serve them effectively in their real estate purchase project.
A key factor that determines the dynamics of the real estate market in Spain is inflation. After a prolonged period of loose monetary policies and the aftermath of the Ukraine conflict, inflation has rebounded and is expected to persist for the foreseeable future. As we highlighted in our Buying trends in Spain in 2022, the potential risks associated with inflation were recognized and anticipated. As we move forward, it is imperative to adapt to this changing reality and its implications for the real estate sector.
Inflation has led to higher short- and long-term interest rates. As a result, mortgage rates have increased significantly compared to a year ago. This situation is expected to persist for at least two years, which could affect real estate financing and moderate the Spanish economy shortly. These factors contribute to the belief that the Spanish real estate market will experience a temporary pause. However, the good news is that mortgage rates, when considered relative to inflation, are not excessively high.
Rates in Spain
At the end of April of this year, the average interest rate was 4.1% and trending upwards. As of March 2023, the average mortgage has an interest rate of 2.67% with the lowest rate ever at 2.44%. The average duration of mortgages is 25 years and 35% of buyers have variable interest rates, while 65% have fixed interest rates. The average rate of variable-rate mortgages is 2.18%, The average rate of fixed-rate mortgages is 2.93%.
According to data from the Central Bank of Spain (November 2022), the residential real estate market in Spain is expected to yield a return of 8-11% this year, even if we take into account those who obtained a mortgage. Investing in Spanish property can still be a lucrative opportunity for your clientele.
Sales and rental activity
The real estate market in Spain is experiencing a change of cycle in 2023 due to macroeconomic factors such as war, inflation, rising costs and rising commodity prices. All of these play an important role in shaping the Spanish economy and real estate market this year.
The purchase prices of Spanish property sales are adjusting due to declining demand, offering better returns for investors. Price adjustments are still expected in areas with unsold supply, but dynamic markets should remain stable. Experts also predict a decline of up to 29% in property sales and purchases this year. Despite caution and funding barriers, real estate investment remains a haven from inflation for those with liquidity.